Yelp Inc. (NYSE: YELP) saw its shares hammered on Thursday after guidance disappointed, along with its earnings. Some investors might wonder why Yelp is not trading lower, considering that its valuation now is over 100 times its earnings. 24/7 Wall St. has covered the analyst calls that made the rounds on trading floors, many of which still show potentially significant upside for the shares of this online review site.

We have tracked reports from Credit Suisse Oppenheimer and Sterne Agee, which all show higher upside. There is also a call from the firm B. Reilly, raising Yelp’s rating to Buy from Neutral, but Stifel downgraded the stock to Hold from Buy.

The company gave guidance for the fourth-quarter net revenue in a range $107 million to $108 million, representing a growth of 52% from the previous fourth quarter. The consensus estimates for fourth-quarter earnings are $0.06 per share on $110.96 million in revenue. The company’s outlook for the full year has revenues in a range of $375 million to $376 million, representing a growth of 61% from 2013. The consensus earnings estimates for 2014 are $0.09 per share on $375.20 million in revenue.

The big takeaway here is that, despite the sell-off that had been seen from highs, Yelp shares were still valued at more than 100 times earnings estimates for 2015. That is generally considered to be priced for perfection. Soft guidance does not equate to perfection by most counts.

ALSO READ: Analysts Voice Concern After AT&T Earnings

Credit Suisse

Credit Suisse has an Outperform rating for Yelp with a target price $85, down from $93. The firm would argue that investors are not in Yelp for the brand advertising and display base. Headwinds are coming from a change in Google’s search algorithm, which ultimately steps down Credit Suisse’s estimates for free cash flow. However, active advertiser and local advertising revenue growth has remained robust.

The Credit Suisse report said:

Although we would argue that investors are not in YELP shares for the Brand Advertising/display-based revenue, the headwinds stemming from Google’s algo changes do generate a step-down in our estimates for free cash flow. That said, active advertiser (excluding deals) as well as Local Advertising revenue growth remained robust at 66% and with the ensuing incremental EBITDA margin implied in the guidance at 36%-41% (vs. 29% in 2Q14 and 28% in 1Q14), we remain buyers of Yelp shares. As we have noted before, the monetization gap between Yelp’s domestic and International operations remains large as is the gap between its oldest and newest cohorts. We maintain our Outperform rating and our target price is now $85 versus prior $93.

Oppenheimer

Oppenheimer maintained its Outperform rating for Yelp but lowered its price target to $83 from $97. Oppenheimer said in its post earnings analyst report:

We are lowering our target to $83 from $97 on reduced 2015E revenue, driven by lower traffic, and a lack of visibility around international growth. While 3Q results exceeded expectations, 3Q UVs slowed to +19% y/y vs. 28% in 2Q, revenue growth slowed in the oldest cohort, and 4Q revenue guidance was 3% below the Street. UVs suffering from historical “double-counting” as behavior shifts to mobile, while GOOG algorithm change also caused drag. International does not have benefit of “first-mover” advantage, as in the US. Reducing 2015E UVs to 8% y/y from 12%. Causes 7% reduction in ’15E revenue. Target implies 37% upside based on after-hours trading; maintain Outperform.

ALSO READ: J.P. Morgan’s Energy Stocks to Buy If $80 a Barrel Oil Is Here to Stay

Sterne Agee

Sterne Agee maintained a Buy rating with a price target of $85. The firm also raised its fiscal year 2014 and 2015 EBITDA estimates to $376.2 million and $559.9 million from $374.1 million and $540.6 million, respectively.

A key point that Sterne Agee made in its report was that the initial negative reaction to the stock likely will be outsized, given its high multiple, but this presents a good opportunity for buyers. In its investment thesis, the firm outlined that the long-term outlook remains strong and is driven by a large total addressable market and the fact that it is in the early innings of growth with an expected EBITDA five-year compound average growth rate of 42% to 62% — not to mention that Yelp is a good acquisition candidate as well.

Sterne Agee would go on to say in its report:

As Yelp continues to expand in additional international markets and its content becomes stronger over time, we expect international traffic to experience resurgence. From a monetization perspective, international represented about 3% of revenue this quarter and has significant room for growth. Cohort performance was solid but exhibited a slight deceleration from 2Q as discussed later in the report.

The stock has a consensus analyst price target of $89.21 and a 52-week trading range of $49.11 to $101.75 and it is trading at almost 150 times its future earnings. Yelp has a market cap of $4.2 million.

ALSO READ: The 10 Safest High-Yield Dividends

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.